In this article you will know the best methods to purchase Bitcoin. Investing in Bitcoin (BTCUSD) may appear complicated, but trading Bitcoin only requires a service or exchange account, and safe storage practisets are advised.
A cryptocurrency exchange account, personal identification documents if using a Know Your Client (KYC) platform, a secure Internet connection, a method of payment, and a personal wallet separate from the exchange account are all required for Bitcoin investors.
Bank accounts, debit cards, and credit cards are all acceptable methods of bitcoin payment, and bitcoin can be obtained through specialised ATMs and P2P exchanges.
Know Before Purchasing Bitcoin
Investors who obtain the private key to a public address on the Bitcoin blockchain can authorise transactions, which are important issues. Private keys should be kept private, and investors should be aware that a public address’s balance is visible.
Individuals can generate multiple public addresses and distribute their Bitcoin holdings across multiple addresses. Significant investments should be kept at public addresses that are not directly connected to those used in transactions. Reference.
The blockchain’s transaction history is transparent, but identifying user information is not. Only a user’s public key appears next to a transaction on the Bitcoin blockchain, making transactions confidential but not anonymous.
Bitcoin transactions are more traceable than cash transactions because they are visible to the public and it is extremely difficult to trace the parties involved on the cryptocurrency’s blockchain. However, researchers and the FBI claim they can trace Bitcoin blockchain transactions to users’ other online accounts, including their digital wallets.
When an investor opens an account on Coinbase, they must provide their identification, and even if they transfer it to another wallet, it can still be traced back to the Coinbase purchase that is linked to the account holder’s identity.
How to Purchase Bitcoin
Step 1: Select a Crypto Trading Service or Location
Exchanges are a convenient option because they provide a wide range of features and more cryptocurrencies for trading, allowing investors to buy, sell, and hold cryptocurrency while also allowing users to withdraw cryptocurrency to their online wallet for safekeeping.
There are numerous kinds of cryptocurrency exchanges. Some exchanges, which are decentralised and do not require users to enter personal information, allow users to remain anonymous. Anonymous exchanges can help bring certain demographics into the mainstream economy, such as refugees or those living in countries with little to no infrastructure for government credit or banking.
Popular exchanges in the United States are not decentralised and must submit identifying documentation to users. Names like Coinbase, Kraken, Gemini, and Binance are among the exchanges that offer Bitcoin and a growing number of altcoins.
Step 2: Link Your Exchange to a Payment Method
Personal identification, such as a driver’s licence or Social Security card, as well as information about your employer and source of funds, may be required depending on the exchange. The procedure is similar to that of opening a standard brokerage account.
Most exchanges allow you to connect your bank account directly or a debit or credit card. Although you can buy cryptocurrency with a credit card, the volatility of cryptocurrency prices, when combined with credit card interest, may increase the overall cost of purchasing a coin. Although Bitcoin is legal in the United States, some banks may question or even refuse deposits to cryptocurrency-related websites or exchanges.
Fees for deposits made with a bank account, debit card, or credit card vary, and exchanges charge fees per transaction.
Step 3: Place an order
Cryptocurrency exchanges have evolved to mimic the same level of functionality as stock brokerages. Crypto exchanges provide a variety of order types and investment options. Almost all cryptocurrency exchanges accept market and limit orders, with some also accepting stop-loss orders.
Kraken has the widest range of order types, including market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders.
Exchanges also allow clients to set up recurring investments, allowing them to dollar-cost average into their preferred investments. For example, Coinbase allows users to schedule recurring purchases for every day, week, or month.
Cold Wallets vs. Hot Wallets
Hot Wallets
Online wallets, also known as hot wallets, are wallets that are accessible through devices such as computers, phones, and tablets. On these internet-connected devices, these wallets generate the private keys to your coins.
The owner of the private key to the cryptocurrency stored in this wallet is not the user of this wallet type. Exchange wallets are exchange-provided custodial accounts. Investor funds are jeopardised if the exchange is hacked. Within cryptocurrency forums and communities, the phrase “not your key, not your coin” is frequently heard.
Hot wallet owners who have not created adequate security risk losing funds to theft. Minimum requirements should include strong passwords, two-factor authentication, and safe Internet browsing.
Hot wallets are ideal for small amounts of cryptocurrency or cryptocurrency that is actively trading on an exchange and is used in the same way as a checking account.
Cold Wallets
Because a cold wallet is not connected to the Internet, it is less vulnerable to compromise. These offline wallets, also known as hardware wallets, store a user’s private key on something that is not connected to the internet and include software that allows investors to view their portfolio without exposing their private key.
A paper wallet is a wallet created on specific websites that generates both public and private keys on paper. Many people laminate these paper wallets and keep them in safe deposit boxes at their banks or in a home safe.
A hardware wallet is typically a USB drive that securely stores a user’s private keys offline. These wallets have an advantage over hot wallets in that they are not affected by viruses that could infect a computer. Private keys are never in contact with a network-connected computer or potentially vulnerable software when using hardware wallets.
Cold wallets are the most secure method of storing bitcoin or other cryptocurrencies. They do, however, necessitate more technical knowledge to set up.
How to Purchase Bitcoin Using PayPal
You can also purchase bitcoin from a payment processor such as PayPal Holdings, Inc. (PYPL). There are two ways to buy bitcoin with PayPal: by linking your account to a debit card or bank account, or by using the balance of your PayPal account to buy cryptocurrencies from a third-party provider.
Bitcoin, Ethereum, Litecoin, and Bitcoin Cash are the four cryptocurrencies that can be purchased directly through PayPal. Except for residents of Hawaii, residents of all states can use their existing PayPal accounts or create new ones. You can also use your cryptocurrencies to pay for goods and services using the “Checkout With Crypto” feature.
When you buy bitcoin directly from PayPal, it earns money from the crypto spread, which is the difference between the market price of bitcoin and its exchange rate with USD. Each purchase is also subject to a transaction fee. These fees are calculated based on the purchase price.
One disadvantage of purchasing cryptocurrencies through PayPal is that an investor cannot transfer the cryptocurrency outside of the payment processor’s platform to an external crypto wallet or personal wallet, and only a few exchanges and online traders accept the payment processor. eToro is one of the few online traders that accepts PayPal for bitcoin purchases on its platform.
How to Purchase Bitcoin Using a Credit Card
Buying bitcoin with a credit card is similar to using a debit card or an automated clearing house (ACH) transfer. However, due to associated processing fees and the risk of fraud, not all exchanges allow credit card purchases of bitcoin.
Credit card processing can add additional charges to such transactions, and in addition to paying transaction fees, the exchange may pass on processing fees to the buyer. Credit card companies treat bitcoin purchases as cash advances and charge exorbitant fees and interest rates on them.
Users of American Express will be charged the current cash advance fee plus a 25% annual percentage fee for such transactions. The credit card company also limits users’ monthly bitcoin purchases to $1,000.
Bitcoin rewards credit cards operate similarly to traditional rewards credit cards, except that they offer rewards in the form of bitcoin, such as the BlockFi Bitcoin Rewards Credit Card.
Alternative Methods of Purchasing Bitcoin
Bitcoin ATMs
Bitcoin ATMs function similarly to in-person bitcoin exchanges. Individuals can insert cash into a machine to purchase bitcoin, which is then transferred to users’ online wallets. Bitcoin ATMs have grown in popularity in recent years, and are now available at the retailing behemoth Walmart Inc. (WMT).
ATM bitcoin purchases are subject to two fees: the purchase fee and the conversion fee for converting a fiat currency to bitcoin. Both fees are relatively high in comparison to other options. The global average purchase fee at Bitcoin ATMs is 8.4% of the purchase amount, and the fee for sales at ATMs is 5.4%.
P2P Exchanges
Some peer-to-peer (P2P) exchange services allow users to communicate more directly with one another. An example of such an exchange is LocalBitcoins. Users can post requests to buy or sell bitcoin after creating an account, including payment methods and prices.
Although P2P exchanges do not provide the same level of anonymity as decentralised exchanges, they do allow users to shop around for the best deal. Many of these exchanges also include rating systems, allowing users to assess potential trading partners before engaging in business.
Mainstream Brokerages
One exchange that provides crypto trading services is Robinhood Markets, Inc. (HOOD). It charges no commission on cryptocurrency trades and purchases and earns money by charging for order flow, which it passes on to other trading platforms or brokerages. Robinhood had enabled trading for seven cryptocurrencies on its platform: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.
In comparison, Coinbase allows you to trade over 100 cryptocurrencies, and traditional brokers such as Fidelity Investments plan to include bitcoin investing in 401(k) accounts by 2022.
How to Exchange Bitcoin
You can sell bitcoin in the same places where you bought it, such as cryptocurrency exchanges and P2P platforms. The process of selling bitcoin on these platforms is typically similar to the process of purchasing it.
Fees are charged by cryptocurrency exchanges as a percentage of the cryptocurrency sale amount. Coinbase, for example, charges 2.49% of the total transaction amount in fees.
Withdrawal limits on exchanges are typically set daily and monthly. As a result, cash from a large sale may not be available to the trader right away. However, there are no restrictions on how much cryptocurrency you can sell.
What Are the Procedures for Buying Bitcoin?
The procedure for purchasing bitcoin is divided into four steps: selecting a venue or exchange to place your order, selecting a payment method, and ensuring safe storage for your purchased cryptocurrency. An online wallet may incur additional fees.
What Are the Most Popular Bitcoin Buying Sites?
Cryptocurrency exchanges, brokerages, and payment services such as PayPal are the most popular places to buy bitcoins. Investors can indirectly own bitcoin by investing in companies that have the cryptocurrency on their balance sheets, such as Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).
What should I expect to pay to buy Bitcoin?
Typically, the cost of purchasing bitcoin includes a fee per trade as well as the cost of converting a fiat currency to bitcoin. The fee per trade is determined by the amount of the trade. A larger trade amount will result in higher fees.
Is my Bitcoin purchase SIPC-protected?
No, your bitcoin purchase is not SIPC-protected.
Individual account fiat balances at certain exchanges, such as Coinbase, may be FDIC-insured up to $250,000 per account.
Conclusion
A bitcoin purchase process consists of four steps: choosing a service or location for the purchase, connecting with a payment method, placing an order, and ensuring safe storage of purchased cryptocurrency. Each of these steps necessitates research and a careful evaluation of the benefits and drawbacks of each service. Bitcoin is available at Bitcoin ATMs, as well as through payment services such as PayPal and mainstream brokerages such as Robinhood.
Warnings –
Bitcoin and other cryptocurrency investments are NOT covered by Securities Investor Protection Corporation insurance (SIPC). The agency protects against the loss of securities and cash in brokerage accounts containing up to $500,000, with a cash limit of $250,000, at regular brokerages.
Customers of cryptocurrency exchanges do not have access to this feature. Coinbase and other cryptocurrency exchanges have crime insurance to protect their infrastructure from hacks. However, that insurance does not cover individual customers against password theft.
Disclaimer: Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is extremely dangerous and speculative, and this article is not a recommendation by shonali18.com or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be consulted before making any financial decisions. shonali18.com makes no representations or warranties about the accuracy or timeliness of the material provided on this website.
